Regulators ask banks to hold more capital

GLOBAL regulators yesterday said Citigroup, Deutsche Bank, HSBC and JPMorgan Chase will need to hold the most extra capital of 28 banks considered so large and complex they need an extra buffer to absorb potential losses.

The four global banks will be required to hold an extra 2.5 per cent of common equity as a percentage of risk-weighted assets on top of a seven per cent minimum being phased in from January, according to the Financial Stability Board (FSB), a regulatory task force for the group of 20 top economies. The additional cushion aims to make sure large banks cannot threaten the financial system in future crises and require government bailouts.

Barclays and BNP Paribas were assigned the next highest buffer of two per cent, according to the FSB. Eight banks including Bank of America Corp and Goldman Sachs fell in the next highest bucket of 1.5 per cent. The remaining 14 banks will be required to hold one per cent of extra capital. No bank was in the 3.5 per cent range, which is considered a stick to stop banks from growing any bigger.

The FSB published a list of 29 so-called systemically important banks last year, but last night’s statement was the first time that it assigned specific capital buffers to each bank.